A senior official has stated that the Goods and Services Tax (GST) Council in its meeting in July is expected to review the proposal by the Central Board of Indirect Taxes and Customs (CBIC) to introduce additional validations in the GST return filing system to combat evasion and fraudulent claims of input tax credit (ITC).

Since November 2020, central agencies have discovered fake ITC claims amounting to Rs 62,000 crore and have made 776 arrests, including professionals.

The introduction of these validations in the GST return filing system aims to curb fraud and revenue losses. Recently, the CBIC has implemented validation and risk rating for GST registrations, as part of its ongoing efforts to prevent fake entities from issuing bogus invoices to claim ITC benefits and defraud the government.

The official mentioned that the strategy to implement additional validations during registration and return filing is designed to reduce tax evasion.

”We are planning to introduce validations in returns filing system in a way such that the process does not become cumbersome for honest taxpayers. The validation would be done by the tax department and ITC claims could be blocked in cases of mismatch,” the official told news agency PTI.

The proposal for introducing these validations will be discussed in the upcoming meeting of the GST Council scheduled on July 11.

CBIC Chairman Vivek Johri had said that the Council will focus on anti-evasion measures to address fake GST registration and fraudulent generation of ITC.

A two-month special drive against fake registration has been initiated by GST officers since May 16, resulting in the identification of around 60,000 entities with potentially fake registration. Of these, on 43,000 entities, physical verifications by way of visiting business premises have been completed by central and state tax officers.

Following this, as many as 11,140 fake GST registration, involving GST evasion of more than Rs 15,000 crore, have been detected by taxmen, with corresponding actions being taken against the perpetrators.

Currently, under GST, registered taxpayers (except composition dealers) file a monthly self-declaration return known as GSTR-3B, which summarises the tax liabilities of a business and includes details of ITC claimed and output tax liabilities.

At present, GSTR-3B is bifurcated into 7 sections — GST Identification Number; legal name of the registered person; outward and inward supplies on reverse charge; eligible ITC; values of exempt, nil-rated, and non-GST inward supplies; payment of tax and verifications.

AMRG & Associates Senior Partner Rajat Mohan said HSN code tagging is already a feature in GSTR -1 used for filing outward supplies. If the same could be pre-filled in GSTR 3B, allowing seamless capture of data points, that would help correctly arrive at the tax due.

“While including commodity or HSN code-wise data in the GST return 3B can offer significant benefits, it is essential to carefully consider a smooth transition for effective implementation of any new reporting requirements from taxpayer end,” Mohan noted.

Composition dealers are required to pay tax on a quarterly basis in a challan-cum-statement, Form CMP-08.

With PTI inputs